We will analyze the valuation of OTC derivatives exploring the effect of collateral, funding and counterparty credit risks.

The first part of the presentation will be devoted to the valuation of collateralized derivatives. We will analyze the effect of different collateralization schemes and reformulate the fundamental theorem of asset pricing under this multiple discounting curves environment associated to different collateralization schemes.

The second part will be focussed on CVA, DVA and FVA. CVA and FVA will be deduced using hedging arguments. We will analyze the problem of DVA hedging and explore CVA hedging under incomplete markets.

Bullet Points:

OIS discounting.

Effect of collateral different from cash denominated in the deals currency.